Jar Banking

Jar banking is a basic process that can save you when you need it most.

Have multiple bank accounts each with its own purpose. When money comes in you will divide the income into the different accounts. So now each account not only has a purpose, but also a percentage for the split. Next we need to define the rules for each account. A rule would be something like: the Tax account can not be touched for any reason other then taxes, EVER!.

So now each account has:

A purpose
A percentage
And a rule
Below are a few suggestions for accounts. The account name defines its purpose. Next to each name you will find a suggested percentage. REMEMBER, the key is not the percentage but the split. The percentages can change. You may only deposit $1.00, that’s right $1.00, in an account but that’s the point. That account grew, slow but true!

Standard bank accounts for a business:

Operations 60%
Tax 15%
Play 5%
Education 5%
Contingency 5%
Long term savings for spending (LTSS) 5%
Donation 5%
Standard bank accounts for individuals who are paid and receive a W2:

Monthly Bills 70%
Education 5%
Play 10%
Contingency 5%
Long term savings for spending (LTSS) 5%
Donation 5%
Here are some suggested rules for each account:

To start off with we need to build / set a minimum amount that will be in each account. This can be anywhere from $100 to $1000. I personally strive for $1000 in business accounts and $500 minimum in personal accounts. This helps in two ways, you always have last resort access to cash and

Operations / Monthly Bills
You must make sure that enough goes into this account. This account is brought to it’s minimum each month.
Tax account
This account can ONLY be used for taxes. This is not a flexible account.
This account is to be fully depleted monthly. This is to be used on fun events, meals or an relaxing. For business reasons this account can span up to 3 months for company parties.
This account is to be used for book, classes, seminars or any other training types. It can span a year but is preferable to be used monthly. Education is the key to growth and expansion.
This account is for unforeseen cash requirements. It is to be used as a last resort. When using this account you must do a cash flow analysis and plan for recovery. If this account is used more then 2 times a year for reasons other then natural disaster, theft or non insurance covered items you must do an accounting evaluation.
Long Term Savings for Spending (LTSS)
This account is tied directly to your goals. This is for big items link homes, cars, office remodel, etc.
Life is full of cycles and flows. Money is not exception. When you donate to your community and other causes, it helps you to be part of your community or interests. Both giving and receive are skills that must be mastered.